By Yusuf Khan


Gold demand surged during the first quarter of 2022 as political and economic uncertainty drove investors toward the precious metal, the World Gold Council said Thursday.

Demand for gold rose 34% to 1,234 tons in the first quarter compared to the same period last year, heavily influenced by inflows into exchange-traded funds, according to a new report from the WGC.

The WGC said that "an uneasy environment of persistently high inflation and elevated geopolitical risks drove investors to gold, helping to propel prices higher." The metal's average price was 5% higher when compared to the fourth quarter of 2021.

ETF demand was particularly strong, according to the WGC, with holdings rising by 269 tons to 3,836 tons--the second-highest level on record since November 2020.

"Gold-price strength, equity-market weakness, rapidly rising inflation expectations and unexpected geopolitical events during the quarter were the key drivers of this demand, even in spite of higher nominal rates," the WGC said.

Bar, coin and jewelry investments all saw drops through the first quarter, largely due to lockdowns in China. Bar and coin investment was 20% lower than the first quarter of 2021 at 282 tons, while jewelry demand fell 7% to 474 tons. Demand is likely to fall further in the second quarter, as lockdowns are extended in China, coupled with the usual seasonal drop in demand for jewelry moving from the holiday season, the WGC said.

Central bank purchasing of gold also more than doubled compared to the fourth quarter of 2021. The WGC canvassed the majority of the globe's central banks for their attitude toward gold and said that "for the first time, respondents highlighted gold's performance during periods of crisis as the top reason to hold gold."

Total supply of gold also rose 4% year on year to 1,156.6 tons, with boosts both in mined and recycled supply. The WGC said that higher prices and lower economic growth had helped to push up recycling rates.

Gold prices have moved lower in recent days, with the yield on U.S. Treasuries and the dollar being seen as a more attractive investment for traders.

But support for gold prices is still likely through the year, according to Krishan Gopaul, senior market analyst at the WGC.

"The inflation story that we are seeing and we have been seeing for quite some time now is a huge tailwind for gold as well. For many investors, one of the motivations that they would have for investing in gold during the first quarter and into the second quarter is really that recognition that gold is a well-recognized hedge against inflation," he said.

Mr. Gopaul described the precious metal as a crisis hedge, adding that the war in Ukraine was another tailwind for prices.


Write to Yusuf Khan at yusuf.khan@wsj.com


(END) Dow Jones Newswires

04-27-22 2044ET